Detailed Rationale

Crisil Ratings has upgraded its rating on the long-term bank loan facilities and debt instruments of Mahaveer Finance India Limited (Mahaveer Finance) to ‘Crisil BBB+/Stable’ from ‘Crisil BBB/Stable’.

 

The upgrade in the rating primarily takes into consideration the company’s adequate capital position backed by its demonstrated ability to raise equity from external sources on regular intervals. The rating also factor-in long standing presence in vehicle finance business thereby maintaining steady profitability across cycles.

 

Mahaveer Finance’s capital position has remained adequate primarily supported by ability of promoters to raise equity from external sources (i.e. PE investors). The company has raised capital of Rs 70 crore with latest being Rs 50 crore from First Bridge India growth fund in March 2024. Supported by this and steady internal accruals, the company’s capital position has improved with networth reaching Rs 186 crore as of December 31, 2024, from Rs 118 crore as of December 31, 2023. The company’s gearing level also remained adequate in range of 3.5-4.5 times and stood at 3.7 times as of December 31, 2024). Additionally, the company is now in advanced stages to raise another round of capital of Rs 50 crore from same investor through CCPS (compulsorily convertible preference shares) and the company has received RBI approval for the same.

 

The company has a track record of over four decades with focus primarily on the vehicle financing. The company has witnessed healthy growth in the past few years as reflected in the three year of CAGR growth of around 30% (fiscal 2022 till 9 months fiscal 2025). The overall AUM stood at Rs 936 Crore, as on December 31, 2024, as against Rs 762 Crore as on March 31, 2024 (Rs 411 Crore on March 31, 2022). The overall AUM mix stood 58% in the CV and CE segments and 42% in the passenger car segment . The company has also been able to maintain adequate profitability with low credit costs. The 3-year average (between fiscal 2023 till 9 months fiscal 2025) return on managed assets (RoMA) stood at 2.0%.

 

Additionally, the rating also factors in the diversified resource profile. These strengths are partially offset by average asset quality metrics and geographically concentrated operations.

Analytical Approach

Crisil Ratings has considered the business and financial risk profiles of Mahaveer Finance on a standalone basis

Key Rating Drivers & Detailed Description

Strengths:

• Extensive experience of the promoters enabling growth: The Executive Vice Chairman, Mr Mahaveer Chand Dugar, has substantial experience in the vehicle financing business and has also conducted training sessions for other financiers. He is supported by his sons, Mr M Deepak Dugar and Mr M Praveen Dugar, who are also the co-promoters. Mr Deepak and Mr Praveen have been involved in the daily operations for over 20 years. Experience of four decades has enabled the promoters to develop an in-depth understanding of the borrower behavior and maintain credit costs, which should continue to support the business risk profile across business cycles. The promoters have expanded their branch network in the southern region to Tamil Nadu, Andhra Pradesh, Telangana and Pondicherry.

 

• Adequate capitalisation: Mahaveer Finance’s capital position has remained adequate supported by ability of promoters to raise equity from external sources (i.e. PE investors) and steady internal accruals. The company has been able to raise equity of Rs 70 crore, in the last three years with First Bridge India growth fund investing Rs 50 Crore in March 2024. The company’s capital position has improved with networth reaching Rs 186 crore as of December 31, 2024, from Rs 118 crore as of December 31, 2023. Additionally, the company is now in advanced stages to raise another round of capital of Rs 50 crore from same investor through CCPS (compulsorily convertible preference shares) and the company has received RBI approval for the same. Post this tranche, the shareholding of First Bridge India Growth Fund will increase to ~31.5% (from 22.7% as of December 31, 2024). As far as gearing is concerned, the company has maintained it at adequate level of 3.5-4.5 times during the last decade and stood at 3.7 times as of December 31, 2024. Therefore, considering the growth in operations, the company is expected to maintain gearing of around 5 times over the medium term. 

 

• Comfortable earnings profile: The company has maintained reasonable track record in maintaining steady profitability over the years and across cycles. The return on managed assets (RoMA) has been consistent averaging ~ 2.0% over the past decade. The comfortable profitability is on the back of the entity maintaining the credit costs within 1% of the average managed assets and the principal losses on repossessed assets have been negligible. During the nine months ending December 2024, the annualized RoMA reduced to 1.8%, on account of the increase in operating expenses and reduction in income from bad debt recovery. For the nine-month period ending December 2024, operating expenses (as a % of average managed assets) increased to 4.6% (annualized) from 4.5% in fiscal 2024. The bad debt recovery income, which supported the earnings profile, reduced to 0.4% (annualized) of the total income, which was earlier 1%. However, maintaining RoMA while scaling up operations, will remain a key monitorable.

 

• Diversified resource profile: The company has raised funding from banks (36%), non-banking financial companies (NBFCs) (34%), NCD (7%) and Direct Assignment (23%), as on December 31, 2024. The company has raised funds amounting to Rs 464 crores raised during the nine-month fiscal 2025. The incremental cost of funds in fiscal year 2025 stood at 12.4%. The company also has sanctions of Rs 185 crore in the pipeline from banks, small finance banks, and NBFCs to support future growth. The ability of the company to raise funds at competitive rates, will be a key monitorable.

 

Weaknesses:

• Average asset quality: Company’s asset quality has remained average as reflected in 90+ dpd of 3.5% as on December 31, 2024, as against 2.7% as on March 31, 2024 (similar level as of March 31, 2023). Adjusting for write-offs, the 90+ dpd has stood in at close to 5% during last 2-3 years (till December 31, 2024). As far as segmental performance is concerned, CV and CE segments (~58% of AUM) had 90+ dpd of 4% while passenger car segment (42% of AUM) had 90+ dpd of 2.7% as of December 31, 2024. Nevertheless, the company’s track record of repossessing vehicles and recovering overdue has remained good which in-turn resulted in lower ultimate credit costs. Crisil Ratings, overall believes, the ability of the company to keep strong check on its portfolio quality especially considering the scale-up in operations will remain key rating sensitivity factor.

 

• Geographically concentrated operations: Mahaveer Finance mainly operates in Tamil Nadu (accounts for 48% of the overall portfolio), followed by Andhra Pradesh (36%), Telangana (13%) and Pondicherry (3%). While the company intends to gradually expand its presence in other southern states, Tamil Nadu is likely to remain the key market over the medium term. Hence, the ability of the company to increase diversity in its geographic presence will remain key monitorable.

Liquidity: Adequate

As on February 28, 2025, Mahaveer Finance had liquidity of Rs 114.1 crore included cash/liquid investments and unutilised cash credit/working capital demand loan. Liquidity buffer for debt repayment and operating expenses arising over April 2025 stood at above 1.05 times. Month-on-month collections (current collections excluding overdue and prepayments) stood at Rs 40-45 crore during the last 6 months.

Outlook: Stable

Mahaveer Finance will continue to benefit from the extensive experience of its promoters and maintain adequate capitalisation. The company is also expected to maintain steady profitability over the medium term.

Rating sensitivity factors

Upward factors:

• Ability to significantly scale up loan book while maintaining RoMA at over 2.5%
• Sustainable improvement in asset quality

 

Downward factors:

• Steady state adjusted gearing exceeds 5 times
• Significant deterioration in asset quality metrics thereby also impacting earnings profile on a sustained basis

About the Company

Incorporated in 1981 and promoted by Mr Mahaveer Chand Dugar and his sons (Mr M Deepak Dugar and Mr M Praveen Dugar), Mahaveer Finance was registered as a deposit taking NBFC with the Reserve Bank of India (RBI). It was taken over by the current management in 1987. In 2015, the company surrendered its deposit-taking license to the RBI and was reconstituted as a non-deposit-taking NBFC asset finance company. It is engaged in used commercial vehicle and passenger vehicles financing in Tamil Nadu, Andhra Pradesh, Telangana and Pondicherry through its network of 70 branches as on December 31,2024.

Key Financial Indicators

Particulars for the year / period ended	Unit	Dec-2024	Mar-2024	Mar-2023	Mar-2022
Total managed assets	Rs Cr	1103	984	720	527.1
Total income	Rs Cr	125	136	103	85.4
Profit after tax (PAT)	Rs Cr	13.9	16.7	14.4	10.5
90+dpd	%	3.5	2.7	2.7	4.2
Adjusted gearing	Times	3.9	3.4	4.5	3.6
Return on managed ass ets	%	1.8*	2.0	2.3	2.3

*on an annualised basis

Any other information: Not Applicable